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Arnold v. Homeaway, Inc.

United States Court of Appeals, Fifth Circuit

May 15, 2018

IVAN ARNOLD, an individual, on behalf of himself and all others similarly situated, Plaintiff-Appellee
v.
HOMEAWAY, INCORPORATED, Defendant-Appellant and DEIRDRE SEIM, Individually, and on behalf of all others similarly situated, Plaintiff-Appellant
v.
HOMEAWAY, INCORPORATED, A Delaware Corporation, Defendant-Appellee

          Appeals from the United States District Court for the Western District of Texas

          Before KING, DENNIS, and COSTA, Circuit Judges.

          JAMES L. DENNIS, Circuit Judge.

         Plaintiffs Ivan Arnold and Deirdre Seim filed separate lawsuits against Defendant HomeAway, Inc.[1] In each case, HomeAway sought to compel arbitration. Concluding that both Seim and Arnold are bound to arbitrate threshold arbitrability questions, we REVERSE the judgment of the district court in Arnold's case and AFFIRM the judgment in Seim's. We REMAND both cases with instructions to compel arbitration.

         I

         HomeAway owns and operates several websites that facilitate short-term "vacation" rentals. HomeAway's sites connect homeowners and property managers with travelers who book their properties online. Arnold and Seim are both HomeAway subscribers who list properties on HomeAway's websites.

         Arnold filed a putative class-action complaint alleging, chiefly, that HomeAway's February 2016 imposition of service fees for travelers was contrary to its prior representations and resulted in a variety of state-law violations. HomeAway argues that its April 2016 Terms and Conditions govern Arnold's action. As relevant here, the April 2016 Terms contain the following provisions:

Any and all Claims will be resolved by binding arbitration, rather than in court, except [the user] may assert Claims on an individual basis in small claims court if they qualify. This includes any Claims [the user] assert[s] against [HomeAway], [its] subsidiaries, users or any companies offering products or services through [HomeAway] (which are beneficiaries of this arbitration agreement). This also includes any Claims that arose before [the user] accepted these Terms, regardless of whether prior versions of the Terms required arbitration.
There is no judge or jury in arbitration, and court review of an arbitration award is limited. However, an arbitrator can award on an individual basis the same damages and relief as a court (including statutory damages, attorneys' fees and costs), and must follow and enforce these Terms as a court would.
Arbitrations will be conducted by the American Arbitration Association (AAA) under its rules, including the AAA Consumer Rules.

         HomeAway moved to compel arbitration in reliance on these provisions. HomeAway argued that, pursuant to the April 2016 Terms and the AAA Rules referenced therein, the parties had agreed to arbitrate threshold questions including "the existence, scope, or validity of the arbitration agreement." Arnold opposed the motion to compel, arguing that the September 2015 Terms and Conditions, which do not contain arbitration requirements, governed. He also claimed that, even if the April 2016 Terms applied, HomeAway's authority to modify any terms or conditions without providing notice rendered the arbitration provision illusory and unenforceable under Texas law.

         The district court denied HomeAway's motion to compel arbitration. The court found that the April 2016 Terms applied because Arnold renewed a subscription for one of his HomeAway accounts in May 2016. However, the court held that, under Texas law, the arbitration provision was illusory because HomeAway had reserved the unilateral right to avoid arbitration at any point without notice. The court did not address HomeAway's contention that the April 2016 Terms contained a delegation clause requiring Arnold to arbitrate threshold questions regarding the arbitration provision. HomeAway filed a timely notice of appeal, as is authorized by the Federal Arbitration Act (FAA). See 9 U.S.C. § 16(a)(1)(B).

         Although it resulted in a different outcome, the history of Seim's case is substantially similar. Seim also challenges HomeAway's imposition of traveler fees. HomeAway moved to compel arbitration under the February 2016 Terms and Conditions, which contained the same arbitration provision the April 2016 Terms did. As in Arnold's case, the district court did not address HomeAway's contention that a purported delegation clause required Seim to arbitrate threshold questions about the arbitration provision. However, the district court, applying Kentucky law, granted HomeAway's motion to compel arbitration. The court concluded that when Seim renewed a subscription for one of her properties and agreed to the February 2016 Terms, ...


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